Archive for May 2014

Hello everyone, we’re back again! This time we are going to briefly review the debacle that is flood insurance. Operated by the National Flood Insurance Program (under the auspices of FEMA) or NFIP for short, flood insurance has gone through quite the upheaval lately. This is due, in large part, to the fact that the program is about $20 BILLION in debt.

As a result, Congress passed the Biggert-Waters Act in 2012 in an attempt to bring the NFIP’s budget deficit back in line. This was to be accomplished primarily by removing subsidies from policies in heavily flood-prone areas so the premium reflected the real risk of insuring a homeowner in such an area. As you can imagine, this created quite a bit of backlash from property owners along the coast, particularly those in Louisiana.

The resultant premium increases imposed by Biggert-Waters were shocking and dramatic, far higher than what was originally predicted. Instead of removing subsidies over time, as was initially proposed, they were yanked all at once for thousands of property owners nationwide. For example, one of our clients saw her premium jump from a little less than $500 to nearly $3,000 in one year.

Thus Congress & the Senate recently passed the Homeowners Flood Insurance Affordability Act. Boiled down, the HFIAA basically sets annual limitations on premium increases to attempt to raise rates in (very small) steps. However, even a glance at FEMA’s overview page outlining the changes reveals confusing and challenging definitions and procedures. When I called the company about getting our client’s premium scaled back due to the change, I was told, almost word for word, “We don’t know whether the new act is going to affect her premium, so we are going to wait until FEMA tells us to do something.”

Very simply, I would summarize all the changes to flood insurance this way: Our government took a program that was quite literally drowning in debt, put together a knee-jerk and poorly executed solution, and reversed it in a similarly ineffective fashion in response to public outrage. This article puts it all together perfectly.

The government had a chance to fix a broken program that had previously served constituents relatively well. It had its problems, as most government programs do, but it was completely blindsided by the severity of storms like Katrina and Sandy. Instead of scaling up property owner premiums over 5 or 10 years to more accurately reflect the risk that they carry, a “NOW NOW NOW” followed by a “LATER LATER LATER” mentality prevailed. As usual, it will ultimately be the property owners and tax payers who foot the bill.

It’s hard to believe how quickly time is going by! It seems like just yesterday that it was -30*F and now we’re nearly halfway through May already! In other words, I really hope you’ll forgive my lengthy absence from blogging.

Today I’m going to start a series addressing a couple different things to consider when insuring your home. As you are certainly aware, things are moving at a pretty rapid pace these days – even for our government! So that means there are a lot of things for you to keep up with as a home owner or renter, not the least of which are threats to the fidelity of your personal & financial identity and protecting your home against flood waters.

We’ll start with the one that affects virtually everyone – data breach and identity theft. It’s hard to imagine that anyone hasn’t yet heard about the thieves that struck Target right before Christmas, accessing the credit information of millions of customers and having a major & long-term impact on Target, both financially and from a human resources perspective. And, of course, there has also been the recent Heartbleed attack and the vulnerabilities of Internet Explorer.

Coupled with the dramatic increase in usage of social media , especially on smart phones, and the amount of business being done online means the chance of having your identity stolen has become dangerously high. All you need to do is take a look at a couple statistics – here or here or here – to know that the risk now is greater than ever before. Yet many customers do not have any form of identity theft coverage on their homeowner’s or renter’s insurance policy. For a relatively minimal amount of premium – $25-50 a year on average – you can add typically $25,000 of identity recovery insurance.

Bear in mind, Identity Theft insurance is intended to assist you in restoring your good name by assigning you a coach or assistant to work you through the process, as well as paying for credit reports and monitoring, but not to restore what’s been stolen. Your insurance company will, via your coach, work with the credit card companies to remove fraudulent charges and with your bank to restore what was stolen. The final decision, though, rests with each of your financial institutions, not with your insurance company.

To summarize, for a minimal amount of premium each year, you can gain a lot of assistance in protecting your identity! (PS – if you’re renting, and you don’t have a renter’s policy – that’s a cheap and easy problem to solve – much cheaper than you think!)